Explain who gains and who loses from a tariff and why the losses exceed the gains
What will be an ideal response?
Domestic consumers lose consumer surplus from the tariff. Domestic producers gain producer surplus from the tariff. The government also gains revenue from the tariff. But the gain in producer surplus plus the gain in government revenue is less than the loss of consumer surplus, so on net a tariff creates a deadweight loss.
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When considering the aggregate demand curve, the wealth effect, interest rate effect and effects from international trade reinforce each other
Indicate whether the statement is true or false
The "principle of rival consumption" applies to which of the following?
A) national defense B) the free-rider problem C) the exclusion principle D) a private good
In the case of a linear demand curve, demand becomes more price elastic as price increases
Indicate whether the statement is true or false
Economic Fact
What will be an ideal response?